Overseeing Projects & Programs at UBS

Month: February 2015

A personal investor recently asked me if he should invest in foreign currency. Working at UBS, understanding foreign currency and foreign currency exchanges is critical, since profits generated from around the globe in a multitude of local currencies are ultimately translated into Swiss francs for reporting purposes.

For the individual investor, I would suggest foreign currency investments are to be avoided. Since in its typical you are simply holding cash in a non-US dollar denomination, the investment is that changes in the exchange rate will make that currency more valuable (ie it becomes stronger with respect to the US dollar). It could happen, of course, but in my view that is akin to a pure gamble.

An investor looking to hedge US-dollar based holdings would better consider investment in foreign stocks (mutual funds) and bonds rather than pure currency. These holdings can serve as a hedge within an otherwise US-dollar based portfolio, but also represent a genuine investment with an expected based on paid interest, dividends, and /or capital gains. Foreign currency investments are way too risky and poorly understood by the vast majority of individual investors, and are best avoided.

All over the web there are tips and tricks for gaming your credit or FICO score. Shifting balances around different credit cards; opening up new lines of credit that you have no intention of using; adding your name to someone else’s credit line.

I hate them all. First, they have only marginal impact on your credit score; second, you are likely to create accounts that you will forget about; these are the most ripe for potential thieves. Third, and worst of all, they miss the point that the best way to manage your credit score is the most obvious: pay down your debt, and pay it on time. It is the most boring advice I can imagine when it comes to credit management. Unfortunately it is also the most effective.

If there is one golden rule for personal finance, it is this: never cosign a loan. No good can come of it. Just yesterday I was waiting for a cab at UBS Tower in downtown Chicago (a long cab wait day, ugh). I overheard what appeared to be two 20-something friends discussing missed payments on a co-signed auto loan. It was a heated discussion: one (Larry the Lender) had cosigned the loan for the other (Dan the Debtor). Dan had missed payments. Larry knew nothing of it, and the creditor started harassing Larry for back payments. Meanwhile, Larry’s own good credit was in jeopardy. So here Larry had done a good deed, and it was costing him not only his credit worthiness, but the friendship as well.

The two biggest names in personal financial management are clearly Suze Orman and Dave Ramsey, and they have been for a long time. Who is the ‘better’ of the two? For the most part, I think both of them offer similar, sensible advice: pare down wants; manage needs; avoid debt; save for the future. Where they differ is on the margins: Dave offers more tactical advice than Suze, while Suze also emphasizes broader considerations like long term healthcare and estate planning.

I enjoy listening to both, and for the core of people looking to improve their financial situations, you won’t go wrong with either.